Dairy Market Update: December 2005

As 2005 nears its end, dairy market prices have continued to remain above the average of the past 10 years. At the Chicago Mercantile Exchange (CME), cheddar cheese in 40-lb blocks ended trading on December 16 at $1.43 per pound; the December average in the most recent 10-year period was $1.36. Grade AA butter at the CME on December 16 traded at $1.3575 per pound, compared to the average December price the past 10 years of $1.20.

Likewise, federal order minimum prices also remain above average. The Class I price mover (before adding the location-specific Class I differentials) in 2005 averaged $14.40 per cwt, down just 58 cents from 2004's record high of $14.98, making it the second-highest annual average Class I price on record. Through November 2005, the Class III minimum price averaged $14.11. While 2005 to date is down from the 2004 record of $15.39 per cwt, the only other year that the Class III price averaged above $13.40 was the $14.20 in 1998. The 2005 Class IV price average through November was $12.90, down slightly from 2004's $13.20. These compare to an average Class III price the past 10 years of $12.43 and an average Class IV price of $12.48.

At the farm level, the U.S. Department of Agriculture (USDA) reports that, through November, the 2005 average all-milk price received by farmers was $15.17 per cwt. This is the third highest price on record; the only other times that the annual average all-milk price exceeded this level was last year's $16.06 and 1998's $15.50.

At the retail level, through November 2005, most dairy product prices have averaged higher than last year. The U.S. Bureau of Labor Statistics reports that the average U.S. city retail price for whole milk averaged $3.18 per gallon through November 2005, compared to an annual average of $3.16 in 2004. For natural cheddar cheese, the retail price so far in 2005 has averaged $4.38 per pound, up from an average of $4.27 last year. Grade AA butter in retail sticks per pound averaged $3.31 so far in 2005, down from $3.49 for all of 2004.

Posted December 19, 2005